Current liabilities are an enterprise’s obligations or debts that are due within a year or within the normal functioning cycle. Moreover, current liabilities are settled by the use of a current asset, either by creating a new current liability or cash. Current liabilities appear on an enterprise’s balance sheet and incorporate accounts payable, accrued liabilities, short-term debt and other similar debts.
Current Liabilities Formula:
Current Liabilities = (Notes Payable) + (Accounts Payable) + (Short-Term Loans) + (Accrued Expenses) + (Unearned Revenue) + (Current Portion of Long-Term Debts) + (Other Short-Term Debts)
Current Liabilities Calculation:
If company XYZ has current liabilities mentioned below
Account payable – ₹35,000
Accumulated wages – ₹85,000
- Accumulated expenses- ₹65,000
Rents- ₹ 1,50,000
- Other debts- ₹85,000
To calculate the total current liability, add all the accounts amount (A2-A7). This calculation will give the total current liabilities amount for that particular year. Likewise, the calculation can be done for multiple years and see the difference.
Also Read: What are Non-Current Liabilities?
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